Governor Brown Signs California's “Fair Pay Act” into Law
On October 6, California Governor Jerry Brown signed into law the California Fair Pay Act. Also known as SB 358, the Fair Pay Act passed unanimously with a 39-0 vote by the California Senate on August 31. The new law makes several notable changes to the existing law, codified at Labor Code Section 1197.5. Specifically, the new law:
- Requires that men and women receive equal pay for “substantially similar work” (not the “same work” as previously required), regardless of whether they work at the same physical location;
- Modifies the business justification defense that may be asserted by employers to except an otherwise-prohibited pay discrepancy from the equal pay requirement based on a recognized justification (e.g., a seniority, merit, or quality/quantity-based pay system) by requiring the employer to establish that the business justification (i) accounted for the entire wage discrepancy and (ii) was reasonably relied upon by the employer;
- Prohibits employers from precluding employees from discussing their wages, discussing the wages of others, inquiring about others' wages, or aiding or encouraging any other employee to exercise his or her rights under the Act; and
- Increases employers' recordkeeping obligations from two to three years.
The new law also allows employees to file civil actions to recover wages or file complaints with California's Division of Labor Standards Enforcement for unlawful wage discrepancies. The statute of limitations is two years “after the cause of action occurs” or three years for willful violations. The Act also prohibits retaliatory actions against employees who “invoke or assist” in the enforcement of the equal pay requirements and allows civil claims for reinstatement, lost wages and benefits, interest and “appropriate equitable relief” against employers who do take retaliatory actions.
All California employers, public and private, should take note of the amended law's most significant changes, including:
Location of Comparators
Before amendment, the law prohibited differential pay between employees of the opposite sex only if they worked at the same establishment. Under the amended law, employers will be prohibited from paying any employee a lower wage rate than that of an employee of the opposite sex performing substantially similar work regardless of location.
The Employer's Affirmative Burden
The Fair Pay Act shifts the burden onto employers to affirmatively demonstrate that a wage differential between employees is not sex-based. To defend against a claim under the equal pay law, employers will be required to show that a wage differential is based upon one or more factors, including a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or another factor other than sex, such as education, training or experience. Employers will also be required to show that any factor(s) upon which a wage differential is based were applied reasonably and account for the entire differential.
Existing law requires employers to maintain records of wages and wage rates, job classifications and other terms and conditions of employment for a minimum of two years. When SB 358 takes effect in 2016, these same records must be kept on file for a minimum of three years.
Potential for Civil Action
The Fair Pay Act creates a civil action for reinstatement, reimbursement of lost wages and benefits, interest and “appropriate equitable relief” against an employer who takes retaliatory action against an employee who engages in any of the conduct protected by subsection 1197.5 (j) (1).
As a result, California employers should review their statewide compensation records and systems to identify positions where there is potential unequal pay for similar work, even if at different physical locations. California employers should also revise existing handbooks, policies, and harassment trainings to (1) prohibit gender-based pay discrimination for similar work, (2) ensure that employees are not prohibited from discussing their wages, and (3) prohibit retaliation against employees who “invoke or assist” in the enforcement of California's equal pay requirements or discuss their wages.
Questions about California's Fair Pay Act?
An experienced California employment lawyer can quickly answer your questions about California's Fair Pay Act. To discuss this new law, or any of California wage and hour laws, feel free to contact leading California employment lawyers at Kingsley & Kingsley. Call toll-free at (888) 500-8469 or click here to contact us via email.